The Asian Development Bank (ADB) on Wednesday projected that inflation in Pakistan would remain the highest in the region at 7.5% and the economy would grow by 4% - the fifth lowest rate among seven South Asian nations, puncturing the government’s claim of lowest prices in the country.
The Asian Development Outlook Update (ADOU) - the twice a year flagship publication of the ADB, revealed Pakistan’s standing among peer regional countries. The ADB has not taken into account Afghanistan’s economy due to prevailing uncertainties in the country.
Pakistan’s “economy is expected to continue recovering in fiscal year 2021-22, with real GDP projected to rise by 4%”, according to the ADB report.
It was the fifth lowest economic growth rate in the region as economic growth rate in the Maldives (15%) and India (7.5%) remain the highest in the region. Bangladesh is projected to grow at 6.8% and Nepal at 4.1% in 2022, according to the ADB.
The 4% projected growth rate for Pakistan is almost at last year’s level and is lower than the government’s official target.
The ADB said that the 4% growth forecast was based on the assumption of recovery in private investment as consumer confidence and business activity improved amid the ongoing vaccination rollout and various economic stimulus measures announced in the budget for FY22.
The ADB said that the 4% growth rate was contingent on the resumption of structural reforms later in the year in an ongoing programme under the International Monetary Fund (IMF) Extended Fund Facility.
“The economic outlook is clouded, however, by high uncertainty because it is closely tied to the course of the pandemic in Pakistan and globally.”
The ADB said that the outlook for agriculture was encouraging in view of the government’s ambitious Agriculture Transformation Plan.
Growth in the industry is forecast to improve in FY22, driven by fiscal incentives announced in the FY22 budget, a substantial rise in the budgeted development spending and strong private consumption underpinned by adequate agricultural harvests, strong remittance inflow and pickup in earnings as social restrictions are reduced and most economic activity resumes.
Enhanced growth in agriculture and industry and expected improvement in domestic demand are projected to boost growth in services, strengthening their contribution to the overall growth in FY22.
Inflation
“Inflation is projected to slow to 7.5% in fiscal year 2021-22, unchanged from the forecast in 2021,” according to the ADB.
However, it is the highest rate of inflation in the South Asian region, followed by 6.2% in Bhutan, 5.8% in Bangladesh, 5.2% in Nepal and 4.8% in India.
Special Assistant to Prime Minister on National Food Security Jamshed Cheema claimed on Wednesday that essential commodities and petroleum products in Pakistan were the cheapest as compared to the regional countries.
In what appears to be an attempt to mislead the people, he translated the regional countries’ prices at the Pak-US dollar parity, which was one of the worst performing currencies in the region.
The ADB has also cautioned about further increase in prices in Pakistan, provided the Pakistan-IMF deal collapses.
“Risk of inflation higher than forecast derives from any unusual increase in oil prices or from potential currency depreciation in the wake of any early winding down of the ongoing IMF programme,” said the ADB.
The ADB said that global hunger was expected to affect an additional 291 million people in 2021 in Asia, of which 72% would be in developing Asia, particularly in Bangladesh, India, Indonesia and Pakistan.
The ADB interviewed 839 farmers in 2020 and 774 in 2021 to gauge the impact of Covid-19 on their wellbeing. The two surveys found that the Covid-19 pandemic had continued to negatively impact farm households, especially in Sindh province.
The Covid-19 pandemic continues to hurt rural households in Pakistan, said the ADB.
In Punjab, one-third of farmer households experienced loss of wages and off-farm earnings in 2020, and the reduction has remained unchanged into 2021.
On the other hand, the consumption of food and other goods has returned to the pre-pandemic level from about a 10% decline in 2020.
In Sindh, negative impacts remain at high levels. In 2020, 37% of rural households in the province experienced reduced wages and off-farm income, and the number remained high at 26% in 2021.
The fiscal deficit is forecast to narrow to the equivalent of 6.9% of GDP in FY22, which is still higher than the target set earlier under a medium-term fiscal consolidation programme supported by the IMF, according to the ADB.
It said that the growth in revenue was projected to accelerate with the rapid pickup in domestic economic activity and higher imports.
Published in The Express Tribune, September 23rd, 2021.
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